Ivar Kreuger

The Russian Revolution in 1917 had a drastic impact on Stockholms Allmänna Telefonaktiebolag and L.M. Ericsson. The war years also led to a shortage of supplies, both for the telephone operators in Stockholm and for their increasing numbers of subscribers. This gave Telegrafverket an ideal opportunity to acquire SAT’s telephone system in Stockholm – and spurred discussion of a merger between SAT and L.M. Ericsson. This reached a conclusion in July 1918 with the creation of a company called Allmänna Telefonaktiebolaget L.M. Ericsson.

The leading light in this process was the chairman of L.M. Ericsson’s board, Arvid Lindman, who had previously been both director-general of Telegrafverket and prime minister. Lindman also took over as chairman of the board of the newly merged company.

It did not take long, however, before the owners were at each other’s throats. A central figure was Karl Fredrik Wincrantz, who had succeeded Henrik Thore Cedergren. From 1922, Wincrantz shared the position as Ericsson’s CEO with Hemming Johansson, and was able to maneuver both him and board chairman Lindman out of their posts at the AGM in 1925.

This coup took place after Wincrantz’s company Ängsvik had bought a majority shareholding in Ericsson. Behind the scenes, Wincrantz was cooperating with a financier called Ivar Kreuger, who owned half of Ängsvik. Kreuger then went on to acquire more Ericsson shares, and the two partners gradually drifted away from each other, in particular after Kreuger mentioned his plans in 1929 to sell Ericsson to its most important competitor, International Telegraph & Telephone Corporation (ITT). In the end, Kreuger bought Wincrantz’s shares in both Ericsson and Ängsvik, and in September 1930 Wincrantz resigned as Ericsson’s CEO.

By this time, Kreuger had managed to acquire an incredible position as majority shareholder in a great many Swedish companies – in addition to Ericsson these included Svenska Tändstickbolaget (Swedish Match), world leader in its sector, SCA, Boliden and a number of property companies. Kreuger’s downfall is a familiar story for Swedish readers. One of the effects of the Wall Street Crash in 1929 was the collapse of his empire, and in March 1932 Kreuger shot himself in a hotel room in Paris.

LOOTED ERICSSON’S CASH

The previous year, Kreuger had looted most of Ericsson’s cash, leading to an acute liquidity crisis for the company. To make things worse, in June 1931 Kreuger had put his plans into action and sold the majority shareholding in Ericsson to ITT. When ITT realized that the company had no assets, it cancelled the agreement and demanded the return of the purchase price. But because there was no money, ITT retained its shares.

Ericsson’s salvation lay in Swedish legislation that limited the voting rights of foreign owners at a company’s AGM to a maximum of 20 percent. This meant that ITT could do little with its majority shareholding. Not until 1959, after many years of tough negotiations, was Marcus Wallenberg, now representing what is generally referred to as the Wallenberg sphere, able to buy ITT’s shares back for a large amount of money.